The Appeal is brought against two decisions made in matters HB/14/25130 and HB 14/29694 both of which were heard by the Tribunal on 10 November 2014.
The reasons for decision were published on 14 November 2014. In matter HB 14/25130 the Tribunal ordered Mr and Mrs Grozdanov (the homeowners) to pay $28,718 to N&T Buildings Pty Ltd (the builder). In the related cross application, HB 14/29694, the Tribunal dismissed the homeowners' claim for damages for defective work and ordered the homeowners to pay the costs of the builder of and incidental to the proceedings.
The homeowners filed a Notice of Appeal dated 12 December 2014. A stay of the orders for payment was later ordered.
Having regard to the grounds of appeal advanced by the appellant, the procedural history of the matter assumes considerable relevance and we have set it out in some detail.
[2]
Procedural History
On 5 May 2014 the builder filed application HB 14/25130 for outstanding payment in the sum of $36,828. That money, the builder alleged, remained outstanding under the home building contract, largely by virtue of unpaid variations.
On 6 June 2014 the homeowners filed a cross application HB 14/29694 seeking payment of an unspecified sum "in excess of $70,000" for damages for breach of statutory warranties. The initial estimate of damages was based on a preliminary building report, prepared by James Hardie Pty Ltd. After the homeowners received their substantive expert report from Mr Connor (the IBAS report) outlining more significant defects, the homeowners' claim was amended and increased to approximately $204,000.
On 30 October 2014 the solicitors for the homeowners wrote to the Tribunal seeking an urgent directions hearing in order to have the hearing date of 10 November 2014 vacated. It was submitted that in light of the large numbers of defects now claimed by the homeowners, a one-day hearing would not suffice to have all the matters in dispute finalised.
The matter came before Senior Member Rosser on 31 October 2014. Rather than vacating the hearing date it was agreed with the parties that only the builder's claim for debt recovery should proceed. The more time consuming homeowners' claim was stood over to a hearing date after 10 November 2014. The Tribunal made the following directions:
On 31-Oct-2014 the following orders were made:
1. On 31 October 2014 the hearing was adjourned to 10 November 2014.
2. The owner's claim is amended to seek an order for payment of payment of
$204,590.43.
3. Procedural directions
Owner's claim HB 14/25130
1. The owner is to file and serve points of claim by 4 November 2014.
2. The builder is to file and serve points of defence by 7 November 2014.
3. On 10 November 2014, the parties' experts are to meet for the purpose of
narrowing the issues in dispute (either on site or at the Tribunal) and are to prepare a
joint Scott Schedule. The Scott Schedule is to be cross-referenced to reports already
provided, setting out areas of agreement and disagreement and the reasons for
disagreement.
4. The owner's representative is to provide unavailable dates for both parties for a
one day hearing to be held in the period from 17 November 2014 to 28 February
2015, by close of business on 3 November 2014.
5. The parties are to file a joint tender bundle in respect of the owner's application no
later than seven days prior to the hearing. The joint tender bundle is to include all
documents relied on by the parties, separated by tabs or file dividers, sequentially
numbered and indexed. Each party is to have a copy of the joint tender bundle
identically arranged to that handed up to the Tribunal.
6. The parties are to hand up a statement of agreed facts, a statement of issues and
an outline of submissions on the day of the hearing.
Builder's claim HB 114/25130
7. The builder is to file and serve points of claim by 4 November 2014.
8. The owner is to file and serve points of defence by 7 November 2014.
9. The builder is to file and serve any evidence in reply by 4 November 2014.
10. The parties are to hand up a joint tender bundle in respect of the builder's
application on the day of the hearing. The joint tender bundle is to include all
documents relied on by the parties, separated by tabs or file dividers, sequentially
numbered and indexed. Each party is to have a copy of the joint tender bundle
identically arranged to that handed up to the Tribunal.
11. The parties are to hand up a statement of agreed facts, a statement of issues and
an outline of submissions on the day of the hearing.
Both applications
12. The parties are strongly encouraged to have settlement discussions prior to the
hearing on 10 November 2014, with a view to resolving both applications. The
Tribunal is prepared to make orders in chambers upon receipt of written terms of
agreement.
A separate written notice of the new hearing date will be sent to you in the near
future.
K Rosser
Tribunal Member
Both parties were legally represented at the directions hearing before Senior Member Rosser and there is no evidence of confusion about the intent of the directions: the builder's matter only was listed for hearing. The time at hearing on 10 November 2014 was to be utilised to allow the experts to meet and prepare a joint Scott Schedule to narrow the issues in the homeowners' defects claim, to be heard at a later date.
However, contrary to the directions issued, both the builder's and the homeowners' claims were determined 10 November 2014.
[3]
The hearing
The hearing proceeded on the 10 November 2014 and the builder's claim and the homeowners' claims were heard together.
A transcript of the hearing was tendered (without objection) by the appellant at the hearing of the appeal.
At the commencement of the hearing the learned Senior Member did not proceed to hear the builder's claim.
Rather than proceeding with the builder's evidence, the Senior Member commenced to hear the homeowners' claim. In the opening comments the Tribunal foreshadowed problems with the IBAS expert report. In short, the Tribunal indicated that it had formed a view that the homeowners' expert was not an independent witness and had not adhered to the expert witness code of conduct. After a short adjournment to permit some discussion between the parties, the Tribunal ruled the IBAS report inadmissible. At this stage the homeowners' case has not been opened and evidence had not been tendered.
The Tribunal expressed concern about the IBAS report, and said:
Senior Member: you and your clients want to claim ….that the particulars of breach are set out in the expert's report. How can that be? The experts report is an expert report about defects nothing more and nothing less. How can it be particulars of the breach…. Doesn't it cross the line and become an advocate for your client? Is that not the job of your client to particularise the breach? [page 1 of the transcript]
A further relevant extract from the transcript is contained at page 3 and following:
Senior Member: I find it [the IBAS report] is inadmissible.
Fallino Gallo: in those circumstances… we may need to withdraw and refile.
Senior Member: Why would you be permitted to do that? What could be the prejudice?
Fallino-Gallo: With respect member [the homeowners'] matter was not set for hearing today and what was contemplated to occur today was for the hearing proper with respect to the variations claims made by the [builder].
The Tribunal was critical of the homeowners' points of claim which included the following:
"Breach of statutory warranties: In carrying out the works the respondent breached the statutory warranties. Particulars of the breaches are set out in the expert report of Andrew Connor of IBAS dated 9 August 2012 and accompanying Scott Schedule.
After ruling the IBAS report inadmissible, the Tribunal did conduct a voir dire to give the homeowners an opportunity to be heard on the ruling. Following the voir dire the IBAS report was again rejected. The ex tempore reasons for the decision commence at page 29 of the transcript. From page 30 the following appears:
"the particulars of the points of claim advanced by the respondent also go on to assert that the damage and the costs set out in the Scott Schedule which accompany the IBAS report are to be found in that report. The corollary of such an approach seems to be the respondents have contracted out (emphasis added) the obligation to frame their claim in wholesale fashion for their expert. This has a number of consequences.
First, it frames the respondent's expert as an advocate in their cause contrary to the provisions of the Tribunal's expert code of conduct.
Secondly, it places the particulars cart before the expert horse as it expects the expert to go looking for defects as against being asked to bring a fresh mind independent of the fray and upon which the Tribunal may rely having regard to the fact that such expert must owe a primary duty to the Tribunal to the question of whether defects as alleged can be found and if so, determined to be material with costs to which the applicant ought to be made liable. … …
None of that occurred in these circumstances indeed evidence is advanced …. [that] Mr Darren Banfield… attended at the property in which the dwelling was now erected by the builder to provide a 'quotation' for a scope of works [that] had been provided by Andrew O'Connor of the Illawarra Building Appraisals' Services.
The reference to Mr O'Connor is of course the reference to the author of the expert report that the respondents propose to rely upon. That is not the proper field of activity for an expert who was retained to provide expert opinion evidence as to the nature of the defects alleged and whether they may be substantiated….
… It follows that the opinions advanced in the IBAS report can be afforded no weight and they accordingly will be rejected. I decline to accept the report into evidence….
Following the rejection of their liability evidence the homeowners sought an adjournment. The adjournment application was advanced on two bases. Firstly, the homeowners' case was not listed for hearing, and secondly the expert evidence in both cases has been rejected. The Senior Member gave the following ruling:
Senior Member: Your application has been refused.
Mr Folino Gallo (counsel for the homeowners): If it please the court. Is that with respect to both claims Member.
Senior Member: Yes it is there seems to be no reason not to deal with both. I've never been persuaded there was reason not to deal with both but having regard to the fact that your expert's evidence in both claims has been rejected by the Tribunal there is no reason not to press on and deal with both of those claims [page 34].
The exchange above followed an earlier exchange between counsel for the home owners and the Tribunal during which counsel for the home owners sought to submit that the conduct of the hearing was inconsistent with the orders that had been made at the earlier directions hearing by Senior Member Rosser. The Senior Member then replied as follows:
"that is just not right. I asked Member Rosser on Friday what was arranged on the last set of directions and what I was told was everybody needs to come prepared and if she had the hearing today was apt to deal with the second tranche, as you put it, on the day. She did not say necessarily what happened but she did not rule it out either. Those were her exact words to me. I do not see why I should rule it out." (page 9)
Following the rejection of the homeowners' expert evidence on defects, the whole of the homeowners' claim was dismissed. At paragraph 46 of the reasons for decision (which are referred to more fully later in these reasons) the Tribunal concluded that:
It follows necessarily .. that the (homeowners) have been unable to satisfy the Tribunal that they have any claim able to be maintained under their application in proceeding HB 14/29694.
The builder's case concerning the variations proceeded, with cross-examination of the lay witnesses. The homeowners objected to the tender of the builder's expert evidence (the Moore report). No opportunity was afforded to the homeowners to object to any part of the builder's evidence at the time of its tender. A proper objection was nevertheless raised at a later stage in the proceedings. It became apparent to counsel that without the IBAS report there was no longer any evidence on defects advanced by the homeowners. The builder's expert report had no work to do and could not be said to inform the Tribunal on any issue still in dispute between the parties. The point was raised but found no favour with the Senior Member:
Folino-Gallo: Member, there is just one outstanding issue I wish to object and take objection late to the building inspection report of the (builder). Well its wholly reliant and in my submission it requires the expert report of the (homeowners) for its context. It's completely…..
Senior Member: it cannot be right, what's the basis of your objection the document stands on its own.
Counsel: Relevance
Senior Member: you choose to advance relevance?... …. Well then it's refused I admit the (expert report of the builder). (page 50 and 51)
Both matters were concluded on 10 November 2014 and the reasons for decision, dismissing the homeowners' claim, were published on 14 November 2014. The builder's claim succeeded and costs were awarded in favour of the builder.
[4]
The decision below
For the purposes of this appeal it is relevant to the record the following aspects of the reserved decision published on 14 November 2014;
1. The decision set out in summary form the oral reasons delivered by the Tribunal for the rejection of the IBAS report.
2. The Tribunal decided when considering the IBAS report, that the home owners had "merely contracted out their obligation to frame their claim in wholesale fashion to their expert, for the reasons given as its interlocutory ruling on the admissibility of the IBAS report, and ruled that it be excluded." [paragraph 30]
3. The author of the IBAS report prepared the "scope of works upon which a further building contractor quoted for the asserted rectification works to be undertaken on behalf of the Respondents" [which] "lead the Tribunal to form the view and find that the author of the IBAS report had abandoned the primary duty owed to the Tribunal and had become an advocate in the Respondent's cause, contrary to the requirements of Experts Code of Conduct." [paragraph 31].
4. There were a number of consequences from the above findings: "first, it framed the respondent's expert as an advocate in their cause contrary to the provisions of the Tribunals Expert Code of Conduct; and secondly, it placed the particulars cart before the expert horse, as it expects the expert to go looking for defects, as against being asked to bring a fresh mind, independent of the fray and upon which the Tribunal may rely, to the question of whether defects as alleged can be found, and if so, determined to be material with costs to which the applicant ought to be made liable." [paragraph 32]. Further the Tribunal said "That is not the proper field of activity for an expert who is retained to provide expert opinion evidence as to the nature of the defects alleged, and whether they may be substantiated." [paragraph 33].
The decision went on to consider the balance of the defence of the homeowners to the builder's claim and recorded that the homeowners alleged that the builder had not observed the terms of clause 13 of the building contract which regulated variations under the contract and that there was no valid basis for recovery by the builder of its variation claims [paragraph 49]. Further the Tribunal found that counsel for the homeowners had raised at the hearing, but not in the points of defence, that no express claim for the value of the works to be determined upon a quantum meruit had been made by the builder [paragraph 50].
The Tribunal decided that the question of quantum meruit had not been put in issue by the points of defence, that it was a live issue in the course of the hearing of the builder's claim and that the point was taken by the homeowners only in submission. The Tribunal therefore decided "in the exercise of the discretion of the Tribunal leave is granted to the Applicant to advance the claim in the alternative upon a claim for a quantum meruit by the filing of an Amended Points of Claim."
In paragraph 64 of the decision the Tribunal accepted the evidence of Mr Ballinger who was the expert for the builder that there was and is a custom or usage on building sites whereby owners and contractors 'will depart wholesale from the rigours of contractual stipulations on an ad hoc basis if it means that "it will get the job done quickly and cheaply". In paragraph 71 the Tribunal found that there was an "arrangement" between the builder and the homeowner which departed from the "strict requirements of clause 13 of the building contract to permit informal variations to occur and be remunerated as such" by the homeowners "as cheaply as possible beyond the contract sum". In the result the order made for payment of a sum of money by the homeowners was "founded" upon the "informal arrangement" or "if that be a wrong assessment" upon the basis of quantum meruit (paragraph 92).
[5]
Notice of Appeal
The appellant filed a notice of appeal dated 12 December 2014.
The homeowners have the right to appeal on a question of law and must seek the Appeal Panel's leave to appeal "on any other grounds" as per the Civil and Administrative Tribunal Act 2013 section 80(2)(b) (the NCAT Act).
The notice of appeal advances the following errors of law:
1. The Tribunal erred by rejecting the tender of the homeowners' IBAS expert report thereby denying procedural fairness;
2. The Tribunal erred by rejecting the homeowners' adjournment application giving rise to procedural unfairness;
3. The Tribunal erred by insisting on hearing both the builder's claims and the homeowners' claim in circumstances where the Tribunal had made directions only setting one matter down for hearing;
4. The Tribunal erred by considering the builder's claim for debt recovery on a quantum meruit basis, in circumstances where such an alternative plea was not pressed or particularised by the parties and without giving the parties the opportunity to be heard;
5. The Tribunal erred in implying a term in the contract that variations would be undertaken on the footing that the homeowners would meet the builder's reasonable hourly costs in the face of a written term to the contrary.
6. The Tribunal failed to give adequate weight to the express terms of the contract and the evidence that the parties agreed that variations were to be written and agreed.
7. The Tribunal's decision is affected by legal unreasonableness in that no sensible Tribunal acting with due appreciation of its responsibilities would have made orders that are the subject of this appeal. The appellant contended that legal unreasonableness is established by various findings that had no support in the evidence. These findings include that the:
1. homeowners had contracted out their obligations to frame their claim to Mr Connor.
2. the preparation of a scope of works for a builder to quote upon meant that Mr Connor had abandoned his primary duty to the Tribunal and had become an advocate.
[6]
The builder's Reply
The builder submits that the matters taken into account by the Tribunal were properly identified concerns.
The builder submits that the Tribunal properly identified concerns with the IBAS report's impartiality. One of those matters was the affidavit of Mr Banfield, who had received a scope of work directly from the expert, as opposed to the owners. The other was the absence of written instructions to the expert in the context that where the points of claim (in the homeowners' claim) and the points of defence to the builder's proceedings mirrored the expert report.
It is conceded by the respondent that the Tribunal expressed an early preliminary view to reject the homeowners' expert's evidence. However, no final ruling was made on the admissibility of the homeowners' expert until after a voir dire on the question of admissibility of the expert report. Both parties were given the opportunity to be heard and to make submissions on the question of admissibility.
It is further conceded by the respondent that the issue of admissibility was raised by the Tribunal of its own volition, and in the absence of any application by the builder. This was irrelevant in light of the fact that both parties were given the opportunity address the Tribunal. In these circumstances the builder submits that no unfairness has been occasioned.
The builder states that the homeowners' counsel tendered the IBAS report in the builder's case, the report was thus introduced by the counsel for the homeowners. After all of the evidence in the builder's case was identified by the parties, including the IBAS report, the Tribunal made an order that evidence in the builder's case would be evidence in the homeowners' case and vice versa. Again, as the voir dire afforded both parties the opportunity to be heard on the question of admissibility, it cannot be said that the proceedings were conducted unfairly.
It is submitted that the homeowners were not disadvantaged by the Tribunal's refusal to adjourn the matters "as both proceedings were being heard that day". It has not been shown that the discretion to refuse the adjournment application, informed by the tribunal's guiding principle of just, quick and cheap resolution of matters, has been affected by a "House v R" error.
It is further submitted that the homeowners were not disadvantaged by the Tribunal's consideration of a quantum meruit claim, when such a claim was not pleaded or particularised and raised during oral argument for the first time. The builder maintains that this cannot give rise to a procedural unfairness as the Tribunal did not determine the builder's claim on a quantum meruit basis but reached a finding that "the parties had reached an informal arrangement for the performance and payment for claims of variations." This finding, the builder submits, was open to the Tribunal as a matter of fact and law.
The builder also submitted that the Tribunal did not in fact make a finding that there was an implied term that variations would be undertaken on the footing that the homeowners would meet the builder's reasonable hourly costs, but rather found that the contract was varied by an "informal arrangement".
[7]
Ground one: the Tribunal erred in rejecting the tender of the IBAS expert report.
The appellant submits that the Tribunal denied the homeowners procedural fairness when it rejected the homeowners' report as a foregone conclusion upon commencement of the hearing and in circumstances where it declined to hear argument on the issue of the expert's impartiality.
The Tribunal found that the preparation of a scope of work for a builder to quote upon (Mr Banfield) could give rise to a finding that the author of the scope of work had abandoned his primary duty of impartiality and become an advocate. The point was not taken by the builder's counsel and at no stage did the builder object to the tender of the IBAS report or impugne its impartiality.
The consideration of the question of impartiality was based on the assumption that the expert had collated a list of defects and that the list of defects informed the homeowners' claim. The homeowners based their defects claim on the opinion of Mr Connor. Based on evidence contained in his report, the homeowners sought and were granted an amendment to increase their claim to $204,000. The increase in quantum from $70,000 to $204,000 was based on Mr Banfield's analysis. He had costed the defects and provided his builder's expert opinion of what it would cost to repair the defects, The IBAS report adopted the Banfield quote as an appropriate cost of rectification.
The Senior Member was critical of the sequence of events described above. It was suggested by the Tribunal that Mr Connor, rather than the homeowners, approached Mr Banfield to provide the quote. That fact, without further investigation or cross examination of those two witnesses did not of itself suggest they did not independently arrive at their respective opinions, one on liability and the other on quantum. These were issues that may have given rise to cross-examination by the builder's counsel, and resulted in submissions on what weight the Tribunal may attach to those reports, but could not of themselves result in a complete rejection of the evidence by the Tribunal without further investigation.
There appears to be no dispute between the parties that the IBAS report was always prepared solely of the purpose of expressing an opinion for litigation. The author attached the expert code of conduct and agreed to be bound by it,
The respondent at no stage submitted, conformably within the principles set out in Makita v Sprowle, that the opinion expressed by Mr Connor was not rationally explained or lacked bases for conclusions reached.
However, this was a conclusion reached by the Tribunal member at paragraphs 36 and onwards, without analysis of any specific reference to the opinions expressed and without reference to the body of the report:
When the IBAS report was considered it became clear that the underlying facts and circumstances purported to be relied upon were not well founded or in many instances were wholly incorrect. That the author of the IBAS report permitted such events to occur was the beginning and the end of their independence for the reasons set out in HG v R (1999) 197 CLR 414 and Makita Pty Ltd v Sprowle (2001) 52 NSWLR 705. When such principles are applied to the IBAS report… it was unavoidable that the report did not provide the necessary factual basis for the opinions expressed.
The conclusion was reached without the author being cross-examined. It may have been that the opinions expressed in the IBAS report were contestable and inexact but an appropriate assessment could only be made following cross examination.
In the opinion of the Appeal Panel the Senior Member's finding that the homeowners had "contracted out" their obligations as litigants by using their expert's opinion to particularise breaches of statutory warranty in their points of claim was, with respect, misconceived.
The fact that the appellants retained Mr Connor to identify defects, which when identified were used by the appellants to plead their case including particularising the case by reference to the expert's report is not a state of affairs which justified the conclusion reached by the Senior Member that the expert had abandoned his independence and become an advocate in the appellant's cause.
It was not unreasonable of the appellants to serve points of claim, containing the summary of the breaches relied upon and to present the breaches by direct reference to the IBAS report. As lay persons they could not be expected to fully and meaningfully particularise their claim until the conclusion of their expert's investigation. The Tribunal's finding that the reference to the IBAS report in the points of claim has undermined the experts' independence cannot be supported as a matter of fact or law. The Appeal Panel is persuaded that the Member fell into error when he disallowed the evidence and that the rejection of the tender gave rise to procedural unfairness.
Accordingly the appeal panel is satisfied that an error of law in respect of ground one of the appeal has been established.
[8]
Ground 2 - the Tribunal erred in refusing the homeowners' adjournment application.
There is ample authority that procedural fairness may be denied if a decision maker fails to adjourn proceedings where such a failure has the effect of depriving a person of adequately presenting its case (see Kearns and Anor v Fair Trading Tribunal of NSW [2001] NSWSC Grove J 951). Once the expert report was excluded the homeowners sought an adjournment. The purpose of the adjournment application was not made clear. The exchange is contained at page 34 of the transcript:
Fallino-Gallo: I am instructed to make an application seeking an adjournment;
Senior Member: your application has been refused.
Fallino-Gallo: If it please the court, is that with respect to both claims Member?
Senior Member: Yes it is, there seems to be no reason not to deal with both.
The exchange between counsel and the Tribunal is not informative. The appeal panel is not entitled to assume that the adjournment application, was for the purpose of adducing fresh evidence in the form of a new expert report. It was not expanded upon and no particular purpose was identified.
However, the application for adjournment clearly arose out of the decision to reject the tender of the IBAS report. Because, in our view that decision (ie to reject the IBAS report) was in error it follows that the rejection of the adjournment exacerbated the denial of procedural unfairness. This ground of appeal is upheld.
[9]
Ground three - The Tribunal erred by insisting on hearing both the builder's claims and the homeowners' claim in circumstances where the Tribunal had made directions only setting one matter down for hearing.
The Senior Member ruled without hearing from the parties that the homeowners' claim would be listed for hearing forthwith and without prior notice to the parties. By doing so the member denied the homeowners the opportunity to properly prepare their case and caught the homeowners by surprise in rejecting their evidence outright.
The appellants submit that this was a denial of natural justice. By reference to the High Court authority of Kioa v West (1985) the appellants state that a party to proceedings could expect to be apprised of the nature of the case that was to be made against it and of the date and time fixed for hearing such as to give it a reasonable opportunity to meet that case and to advance its own.
The homeowners were prepared to meet the builder's claim in debt, that being the only one listed for hearing. The appeal panel is satisfied that the homeowners' were taken by surprise when their matter was forced on for hearing and its expert evidence rejected without any application from the other side. The directions made on 31 October 2014 were clear: the builder's case was to be heard on 10 November 2014 and the homeowners' case was to be heard on a date to be fixed on or after 17 November 2014. In the opinion of the Appeal Panel it was not appropriate for the Senior Member to quote a conversation he had had with the member who had presided at the directions hearing on 31 October 2014 because the parties were obliged to comply with, and were entitled to rely upon, the published directions.
In our view a reasonable opportunity to meet a case or to advance a case involves similar considerations as the requirement to have a reasonable opportunity to be heard. What is 'a reasonable opportunity to be heard' will, of course, vary from case to case. In part that is because, as Gleeson CJ said in Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1 at [37]: "Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice."
The result of the Senior Member's decision to make rulings upon the homeowners' case was to deny them a reasonable opportunity to be heard. Here the denial of a reasonable opportunity to be heard was not just the decision to consider (and reject) the homeowners' expert evidence when that case was not listed for hearing, but it was also the fact that the basis for the rejection of the IBAS report was occasioned by a finding that the expert lacked independence in circumstances where the findings of fact do not support the conclusion that the expert had lost his independence
The third ground of the appeal has been established.
[10]
Ground four Quantum meruit denial of procedural fairness error of law
The appellants contend that the Tribunal acted unfairly when it allowed the builder to raise at the hearing a quantum meruit argument when such a claim was not pleaded or particularised and when it was not in a position to meet such a claim. The appellant's claim that this amounted to procedural unfairness and thus an error of law.
The builder maintains this ground of appeal must fail as the Tribunal's decision to award the variations was not based on the principle of restitution but on a finding of an "informal arrangement" between the parties (see paragraph 71 of the reasons for decision) and was therefore a decision based in contract.
However, the builder's contention is not reflected in the reasons. Contrary to what is expressed at paragraph 71 of the reasons, the Tribunal also appears to consider the quantum meruit issue in paragraph 52 of the reasons:
On the basis that the question that the quantum meruit was not put in issue by the Points of Defence, it was a live issue in the course of the hearing on the evidence adduced by the applicant, in the exercise of the discretion of the Tribunal leave is granted to the applicant to advance the claim in the alternative upon a claim for a quantum meruit by the filing of an amended points of claim.
Quantum meruit was relied upon in paragraph 92 as a basis for the order against the homeowners.
It appears that two new causes of action were raised by the Senior Member and embraced by the builder and that these were not particularised or pleaded prior to hearing: a quantum meruit claim and the "informal arrangement" in the form of an implied term read into the written contract.
The builder confirmed that its points of claim did not raise a plea of quantum meruit. The homeowners objected to the claim of quantum meruit being raised for the first time during submissions:
Senior Member: All the evidence that flows in this matter this afternoon has demonstrated to me that this is a claim either under contract or upon a quantum meruit. ….why shouldn't I just treat it and run it on its merit.
Folino-Gallo: Well, again that is in my respectful submission procedural fairness. To the extent that it is the elephant in the room, the reality is that it does not appear anywhere in the pleadings.
Senior Member (to counsel for the builder): I am afraid I am against you on the quantum meruit. It seems to me it properly needed to be pleaded and hasn't been so I think you need to address me on the contract.
The transcript suggests that initial attempts to introduce a quantum meruit claim into the proceedings were rejected (see page100). However, in the reasons published later the quantum meruit claim was allowed, contrary to the earlier ruling. At paragraph 52 of the reasons the builder was granted leave to proceed with its claim on a quantum meruit basis.
In the opinion of the Appeal Panel there was an error of law constituted by procedural unfairness by reason of the fact that although the claim in quantum meruit was rejected at the hearing, it was relied upon in reasons published after the hearing. As the appellant submits this error was compounded in that the reasons concerning quantification do not distinguish between the amount to be calculated on a contractual basis and the actual value of the relevant works for the purposes of a quantum meruit claim.
It was held that it is a denial of procedural fairness, and thus an error of law, to determine a claim on a basis that was not in issue or argued in proceedings. In Warkworth Mining Limited v Bulga Milbrodale Progress Association Inc [2014] NSWCA 105 at [40] and [41] Bathurst CJ said:
There will be procedural unfairness where information is used by a decision maker in a way that could not reasonably be expected by one party and that party is not given an opportunity to respond to that use... Another aspect of procedural fairness was argued in the present case, namely, that where a court determines a matter on a basis that was not in issue or argued in the proceedings, there have been a denial of procedural fairness: see Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141. This is a basic requirement for a fair trial.
Here, the decision in respect of the claim in quantum meruit, having been rejected at the hearing but allowed in the reasons, gives rise to procedural unfairness of the kind referred to by the Chief Justice.
Grounds one, two, three and four of the appeal have been made out. Given the nature of the errors, the Appeal Panel is not in a position to arrive at findings that may dispose of the matter. In light of the findings that errors of law that have been established in respect of four grounds, it is not necessary to determine the other grounds of the appeal. It is appropriate to remit both matters HB 14/25130 and HB 14/29694 to the Consumer and Commercial Division for rehearing.
Accordingly, the Appeal Panel makes the following orders:
1. The Appeal is allowed.
2. The decisions under appeal are set aside.
3. Both matters are remitted to be reheard in the Consumer and Commercial Division of the Tribunal.
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
[11]
Amendments
17 June 2015 - Typographical error
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Decision last updated: 17 June 2015